Monthly Archives: September 2014

Business Court Rules that Class Counsel’s Fee Agreements Are Not Automatically Discoverable

View David Wright's Complete Bio at RBH.comIn order to meet the requirements of due process, a class representative must be “adequate” and able to represent the class of individuals that may be bound by the judgment rendered in a class action. And class counsel, in turn, must not suffer from conflicts and must demonstrate that he or she is capable of adequately representing the class. Because fee agreements are not typically subject to the attorney-client privilege, does that mean that defendants – in a class action – can obtain in discovery a copy of the fee agreement between the putative class representative and class counsel? Judge Bledsoe, in a case of first impression in the North Carolina court system, held “maybe,” but not immediately and not without a good reason. This is not an easily answered question. As one court concluded: “There is nothing magical or privileged about a fee agreement in class action litigation.” And because the question arose in the Business Court on a motion to compel, the “relevance” inquiry is not an evidential one but is watered down by the breadth of Rule 26’s scope. But – relying on considerable federal authority – the Business Court held that, absent the articulation by defendants of a good reason to see the fee agreement with plaintiffs’ counsel, they could not simply indulge their curiosity. The ruling was not absolute, though – Judge Bledsoe denied the motion to compel without prejudice to later renewal. The lesson is this: If you want to see the fee agreement with class counsel, be prepared to make a showing of what issues in the case it relates to beyond simply “the adequacy of counsel.” Judge Bledsoe’s ruling contains a number of other points relevant to business litigation generally, each of which is covered by Mack Sperling’s excellent post in the North Carolina Business Litigation Report.

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Different View of the Predominance of “Damages” Issues Provokes Dissent in Court of Appeals

View David Wright's Complete Bio at RBH.com A recurrent question under Rule 23 is whether and when individual issues pertaining to damages can engulf otherwise common questions and make class litigation unwieldy. The dilemma is clear: On the one hand, doesn’t it make sense to try the common liability issue once rather than over and over again? On the other hand, trying a bunch of individual damages issues, that differ from plaintiff to plaintiff, doesn’t sound either like class litigation or a model of efficiency. The United States Supreme Court, in Comcast Corp. v. Behrend, has emphasized that lack of commonality in establishing damages can defeat class certification, and we have discussed here previously the North Carolina Supreme Court’s treatment of the issue in Beroth Oil Co. v. NC DOT.

Earlier this month in Sanders v. State Personnel Commission, a plain vanilla affirmance from the panel majority of a trial court’s ruling not to certify a class provoked a strong dissent from Judge Robert N. Hunter. Judge Hunter, citing Beroth, thought the majority had confused the predominance inquiry. Judge Hunter viewed the damages and liability issues separately and thought that the majority muffed the “predominance” inquiry because the “individual issues” related only to damages. He cited Newberg on Class Actions (without mentioning Comcast) for the proposition that “Rule 23(b)(3) predominance . . . is satisfied despite the need to make individualized damage determinations”).

This will likely go up to the North Carolina Supreme Court, so we’ll be watching for any clarification of Beroth.

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Recent Filings – August Digest

View Susan Huber's Complete Bio at RBH.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of August’s filings:

Pohutsky v. Pella Corp., No. 2:14-cv-03491 (D.S.C. Aug. 29, 2014) (case transferred to MDL from U.S. District Court for the District of Maryland).

Dineen v. Pella Corp., No. 2:14-cv-03479 (D.S.C. Aug. 28, 2014) (case transferred to MDL from U.S. District Court for the Middle District of Florida).

Aldrich v. Convergent Outsourcing, Inc., No. 7:14-cv-03456 (D.S.C. Aug. 27, 2014) (alleging violations of the federal Fair Debt Collection Practices Act on behalf of individuals in South Carolina). The case was originally filed in the Union County Court of Common Pleas on July 24, 2014.

Drummond v. Volvo Group North America, LLC, No. 2:14-cv-03460 (D.S.C. Aug. 27, 2014) (product liability action alleging boat engine defects).

Weaver v. Aegon USA, LLC, No. 4:14-cv-03436 (D.S.C. Aug. 25, 2014) (alleging supplemental insurer failed to pay all actual charges related to cancer treatment as required by the policy). Similar class claims were made and settled in Runyan v. Transamerica Life Ins. Co., No. CV-09-2066-3 (Pulaski County, Arkansas), and the complaint requests a declaratory judgment that the Runyan judgment not operate as res judicata for the claims in this case.

Goodbar v. Triangle Char & Bar East LLC, No. 2:14-cv-03422 (D.S.C. Aug. 22, 2014) (collective action under the Fair Labor Standards Act alleging minimum wage and overtime violations based, in part, on tip sharing violations and defendant restaurants’ practice of requiring bartenders to pay for collective alcohol inventory losses resulting in wages less than the minimum wage).

Herspold v. King Kong Sushi Bar & Grill, LLC, No. 4:14-cv-03418 (D.S.C. Aug. 22, 2014) (collective action under the Fair Labor Standards Act alleging minimum wage and overtime violations based, in part, on tip sharing violations).

Gordon v. TBC Retail Group, Inc., d/b/a Tire Kingdom, No. 2:14-cv-3365 (D.S.C. Aug. 20, 2014) (collective action pursuant to the Fair Labor Standards Act for alleged failure to pay overtime wages to Tire Kingdom mechanics).

Thomas v. NVR, Inc., No. 0:14-cv-3348 (D.S.C. Aug. 19, 2014) (removal pursuant to 28 U.S.C. § 1332(d) of purported class action alleging construction defects in 177-unit townhome development in York County). Brought on behalf of the townhome owners, this lawsuit mirrors a lawsuit by the townhome owners’ association that is currently pending in South Carolina state court.

Schroeder v. Pfizer, Inc., No. 2:14-cv-03255 (D.S.C. Aug. 14, 2014)  (a nationwide class action alleging that Pfizer’s Lipitor medication caused plaintiffs’ diabetes, the complaint in this case was originally filed in Missouri state court on February 27, 2014). After being removed to the Eastern District of Missouri in April, this case was transferred to the Litipor MDL in August. As previously reported, other cases transferred to this MDL include Alexander v. Pfizer Inc., No. 2:14-cv-2508 (D.S.C. June 20, 2014).

Robertie v. GAF Building Materials Corp., No. 7:14-cv-165 (E.D.N.C. Aug. 13, 2014) (this purported class action arises from alleged defects in GAF Elk Cross Timbers decking that, inter alia, cause the decks to warp). The complaint defines a nationwide class of property owners with thirteen common questions of law and fact and asserts claims for declaratory judgment as well as negligence, breach of implied warranty, and unfair and deceptive trade practices under North Carolina General Statute § 75-1.1. Although defining a nationwide class, the complaint seeks monetary and injunctive relief only on behalf of Plaintiffs “and all others similarly situated in North Carolina.”

Velasquez Monterrosa v. Mi Casita Restaurants, No. 5:14-cv-00448 (E.D.N.C. Aug. 8, 2014) (alleging violations of the Fair Labor Standards Act and N.C. Wage and Hour Act for unpaid straight-time and overtime wages at Defendants’ 15 restaurants in Fayetteville and Rockingham). Plaintiff brings both a collective action under the FLSA and a class action under the NCWHA. The purported class is defined as “all current and/or former employees of Defendants who were hourly or salaried employees whose primary duty was non-exempt work, and who were not compensated for all of their hours worked and/or time and one-half for hours worked above forty (40) per week.” We have previously posted on such “fail-safe” classes. This litigation follows a similar collective action against the restaurant and related entities, Zelaya v. J.M. Macias, Inc. No. 5:96-cv-00955, (E.D.N.C. 1998), where Judge Britt adopted the recommendation to grant partial summary judgment in favor of plaintiffs for overtime liability under the FLSA.

McCoy v. RPM Management Group, Inc., No. 2:14-cv-03171 (D.S.C. Aug. 7, 2014) (alleging violations of the Fair Labor Standards Act for failure to pay minimum wages and overtime at 5 Kickin’ Chicken restaurants based, in part, on unlawful tip-sharing arrangement).

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North Carolina Court of Appeals Uses Lenient Standard of Review in Affirming Denial of Class Certification

View David Wright's Complete Bio at RBH.com In a decision filed today, the North Carolina Court of Appeals held that the trial court did not abuse its discretion in declining to certify a class of Currituck County property owners upset about an easement affecting their coastal property. After observing that denial of class certification affects a substantial right, the Court upheld the trial court’s findings that the Parker’s Landing Property Owners’ Association, Inc. (“POA”), the putative class representative, had a conflict with the members of the class and had not shown that “it would be impractical to join all the members of the class.” The standard of review framed by the court was decidedly lenient. The trial court order, it found, was not “manifestly unsupported by reason” or “so arbitrary that it could not have been the result of a reasoned decision.” In a companion case, the Court indicated that this dispute has been ongoing for seven years, and required “sorting through the quagmire” “thrown before this Court.”

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